Daily FX EUR/USD, GBP/USD Commentary May 31, 2012
Welcome back for the May 31, 2012 Fx commentary.
I cant say I was surprised to see the 100+ pip moves on the EUR/USD and GBP/USD when I woke up this morning. A little disappointed I didnt get a trade yesterday but still happy that some of our more aggressive members did. Good job guys.
At this point I am treating this as the second push and expecting the third today on the EUR/USD. The chance for some month end flows could give us a decent pullback for a nice clean entry on the manipulation but I am not counting on it with the way Europe is handling the mess they are in. The chart below shows the first long term push below the red line and the second is the push below Tuesdays low from yesterday. There may be a small chance to gain some pips from the lows on those month end flows but I would not be holding for a larger move. Our next major support level on the daily chart is the 1.2150 area and I expect we may see that level sooner rather than later.
The fact is that the Smart Money is running out of tricks to try and do the short squeeze. After the rumors floating around of the ESM funding banks directly gets squashed by Germany. We know that in order for that to happen there needs to be treaty changes and possibly constitutional changes around Europe and considering how European politicians drag their feet on any real change mechanisms that seems to be asking the impossible at this point. So all things considered for them to be using such lame rumors to to move the markets up shows me that they are coming to the end of the bag of tricks. We may be in for the major drop here soon guys. Im just hoping I am in when it does happen hahaha.
The GBP/USD is in a little more of a tricky situation and has more potential for the reversal as we see 3 intraday pushes from the highs Tuesday. having said that we are not seeing a bottoming formation which to me is suspicious. I would at least expect to see an attempt at taking profit during the end of the US session to make me truly believe the reversal has potential and there simply was none. My thoughts are that the first push did not seriously breech the lows and is questionable at this point with the lack of the bottoming formation. It has broke and closed below its last major daily support and is on its way to test the lows around 1.52-1.53. A return to the 1.5520 area is the best broken daily support that should be resistance and a good place for some manipulation to occur. With the chance of month end flows its possible we get there today but I am not holding my breath for it and will be looking for clear manipulation to short from.
Forex News Today
Today is busy with a bunch of European data starting with Swiss GDP and later SNB Gov Board Member Danthine Speaks. I usually dont look at Swiss data but this could have an effect on the euro. With the GDP expected to be flat 0.0 and the strength of the Swiss Franc hurting the Swiss economy I expect some talk of maintaining the floor in the EUR/CHF and possible verbal intervention which will effect the USD/CHF and in turn the EUR/USD so that will be one to watch.
The EZ starts off with German Retail Sales expected to be 0.1 a significant drop from last months 0.8 that has been revised to 1.6. This could be interesting as a surprise drop would definitely show more chance of recession in Germany. Then there is French Consumer Spending, German Unemployment Change and CPI Flash Estimate y/y. The most important of these will be the CPI figures as if they do show the sharp slowing of inflation it does give the ECB more room to cut interest rates. I do not expect a surprise up but the chance for the drop is there and this will further weaken the Euro. Topping it off we have ECB President Draghi dribble in the mix. As we know anything can happen when he opens his mouth.
The US session starts off with some Fed speak from Pianalto and then ADP Non-Farm Employment Change expected to rise a bit. ADP is not the market mover like NFP tomorrow but if it can manage a surprise to the upside it may feed the decoupling fire and be USD positive. 15 minutes later we have US Quarterly Prelim GDP expected to drop slightly and Unemployment Claims expected roughly the same as last release. If there is really any decoupling going the GDP will surprise to the upside but I have my doubts. If Unemployment claims rise then that will be USD negative as employment is part of the Feds mandate and may bring in thoughts of QE3 again. Last is Chicago PMI expected to rise slightly.
Lets also not forget that the Irish Vote for the Stability Pact is today also and could be a wild card for the US session. The markets will punish the Euro if they dont ratify the treaty so I will be paying close attention to that if I am trading the US session today.
My Buddy Charles Biederman
No I dont really know him but I really like his no BS attitude too. Here he is talking about the fraudsters and how they are getting away with it. But not for long. And check out this article too. You know something is up when the two richest families in the world are merging to protect their wealth.
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